Big Changes At AMC Entertainment: Q&A With Gerry Lopez

Don’t rule out the possibility that China’s Dalian Wanda Group will eye the U.S. movie production business now that it has agreed to pay $2.6B for AMC Entertainment. The exhibition chain’s also considering allowing texting during some showtimes. AMC chief Gerry Lopez, 52, says all kinds of things can happen these days, and especially following his blockbuster deal last week with Wanda’s billionaire chief Wang Jianlin. It’s Wang’s first major foray outside of his country, as well as the biggest buyout by a Chinese company of a U.S. entity. If approved by government officials, Wanda will pick up the No. 2 movie chain — whose initials used to stand for American Multi-Cinema — with 5,034 screens at 346 theaters in the U.S. and Canada.

The deal cures AMC’s biggest headache. It needed to pay off its private equity owners: J.P. Morgan, Apollo Management, Bain Capital, The Carlyle Group, and Spectrum Equity. The company had hoped to go public but that effort stalled as AMC continued to spill red ink. In the 52 weeks that ended in March it generated a net loss of $82M — an improvement from the $122.9M loss in the same period ending a year ago — on revenues of $2.6B, up 6.7%. Wanda’s purchase price includes the assumption of AMC’s $2.2B in debt, which required the chain to pay about $160M in interest in its latest fiscal year.

What happens now? Deadline Executive Editor David Lieberman spoke with Lopez, a former Starbucks exec, about AMC’s plans with Wanda and other hot-button issues in exhibition. This interview was edited for length and clarity:

Recent Comments

So for all the blustering Hollywood did about battling piracy, they OK this deal? Do they realize...

anon2

3 years

The U.S. government should block this deal on the grounds that movie piracy and IP theft is...

Kplan

3 years

One of the Broadway musicals in NYC (can't recall which just now) created a specific area for...

DEADLINE: Wanda is involved in film and TV production as well as theaters. Does it plan to enter the production business in the U.S.?

LOPEZ: No plans at the moment. But who knows what the future brings? Buying AMC is part of a larger, greater vision that Chairman Wang does have. I can tell you that in the exhibition arena, his aspiration is to have a global footprint. And global goes beyond China and the U.S. I would not anticipate by any stretch that we will be the only acquisition he will make outside of his home country.

DEADLINE: From Wang’s public comments about the need to refurbish your theaters it sounds like he considers AMC to be a fixer-upper.

LOPEZ: That’s not quite the plan. We are a fixer upper relative to his own circuit. Their circuit basically did not exist five years ago. Our leases run for 20 years. So many of our assets are older than their exhibition company is. What we are, though, is an opportunity to invest in remodeling the buildings. So it’s a question of perspective.

The circuit is in great shape. We track very, very closely our guest feedback regarding the state of repair of the buildings, the cleanliness of the building, the service they’re receiving, did the show start on time. And the scores on the general repair of the facility and the cleanliness candidly have never been higher than they’ve been over the last three months. We put a lot of effort into, clean the bathrooms. This is a retail business. The movie may be great. But if the bathroom isn’t clean, trust me, I hear about it.

DEADLINE: The announcement says Wanda will invest $500M in AMC “over time.” Can you be more specific?

LOPEZ: It’s more than a year and less than five. This is about doing the things we’ve already been doing that we know work and accelerating the pace of some of these remodels and deployment of some of these ideas. This isn’t like a kid in a candy store.

DEADLINE: What has to be done first?

LOPEZ: We have a lot of debt on our balance sheet accumulated over the years. We want to start retiring some of that and over time bring the debt load down.

DEADLINE: A lot of theaters that couldn’t afford to make the transition to digital projection are expected to be up for sale soon. Could you be a buyer?

LOPEZ: Absolutely. We’ve always been buyers and sellers, mostly buyers. This transaction does nothing but enhance our ability to be buyers.

DEADLINE: But you’re selling your Canadian theaters. What’s their status?

LOPEZ: They are under review. We expect to have, with any luck, an announcement we can make there in two to four weeks. Success up there has been hard to come by.

DEADLINE: You have a new contract with Wanda. How long does it last?

LOPEZ: My management team and I have all signed new deals with Wanda. We’re not getting into the details. You can say that they’re longer in scope than 18 months. In our industy they’d be considered long term.

DEADLINE: Your IPO is still technically alive, but you haven’t moved on it. What’s the problem?

LOPEZ: It’s just a tough, tough market to try to go public. You needed stability in the equity market and we haven’t had it. Inside of that equity market, the IPO market has been a nightmare. Look at Facebook. This is the most highly anticipated IPO since Google. Look at what happened to it. And then you needed an industry that was on the upswing. Well, as I think everybody in the industry knows, 2011 was challenged. 2012 is looking very very good. But to have a successful IPO you need all three things. You need the blonde, the brunette and the redhead to want to dance together to have a good show.

DEADLINE: AMC’s financials show that you had problems last year. Was that just due to the movies that studios released or did you have operational problems as well?

LOPEZ: It’s all movie quality and quantity. What we had in 2011 was a confluence of fewer movies and each one of the movies grossed less. I’ve got to pay the rent; I’ve got to pay whether 30 people show up or 3,000 people show up. We’re in the high rent district. When the industry downturns we will suffer more than the other guys. When the industry goes the other way, we tend to do better. For the last 16 weeks in a row we have outperformed the industry and a lot of it has to do with the movies. For the last 10 weeks we seriously outperformed the industry because you have more IMAX and more IMAX that’s doing better. When that happens, we will outperform anybody.

DEADLINE: Some theater chains say that so many young people want to use their smartphones to text during films that they may allow it during some showings. Would you consider that?

LOPEZ: It’s a source of much debate. We continue to look at it. I will declare, I am not a fan. It annoys me. We get it. We understand it. But by God, man. We’re trying to sell you an experience. Give me a chance to deliver that experience to you. That’s more of a personal statement than a corporate edict at this point.

DEADLINE: Sony wants theaters to share more of the expense for 3D glasses. Where do those conversations stand?

LOPEZ: What we have has worked and continues to work. I heard what Sony said. The studios make investments behind 3D. So do we, and so did RealD. We all have a share of the expense associated with 3D. We remain open minded to a new economic model on the glasses. We just haven’t seen one that appears as fair as the one that we have in place. I’m not rushing to change something that seems to work just fine for three years across the entire industry.

12 Comments

Antitrust/Regulators • on May 29, 2012 2:32 pm

Any chance the US GOVT doesn’t allow this deal to go thru. 5000-plus screens is a lot of potential media control for a foreign country, isn’t it?
Also, is there any “out” for AMC in this deal if Wang goes to jail again and stays there for an extended period of time?
Seems like this is the last kind of entity we’d want involved in Hollywood, but maybe I’m wrong…..

Walter • on May 29, 2012 2:32 pm

The US Govt. won’t do a damn thing about this. We are in the process of being owned lock, stock & barrel by the Chinese, thanks to the trillions of bucks we’ve sent over there to buy their cheap goods. This is only the beginning.

Adam • on May 29, 2012 2:32 pm

There is a reason that AMC is bleeding so badly… it’s a dying business. An increasing number of people don’t, can’t and won’t sit in a communal enviroment that’s over-run with people who don’t respect the fact that they are in a public setting and that there are rules of etiquette that should be followed. It is just totally unpleasant and unsatisfying.

Sam • on May 29, 2012 2:32 pm

There are laws against studios owning the theatres so I doubt they can legally enter the production side. Media 101…

stealth • on May 29, 2012 2:32 pm

Try out the AMC’s in Santa Monica, CA… Sad.

jake • on May 29, 2012 2:32 pm

Is this texting during a movie really gaining steam? That is the death of cinema as we know it.

Kplan • on May 29, 2012 2:32 pm

One of the Broadway musicals in NYC (can’t recall which just now) created a specific area for people who want to text — this kept them out of everyone else’s way and from distracting people who ARE there for an experience.

This to me was a smart compromise — give people what they want without taking anything away from everyone else.

Overall, I don’t think it should be allowed, but considering how poorly ALL movie theaters are maintained these days — where ushers stand around during shows doing nothing but chatting w/one another — laziness will win the day.

anon • on May 29, 2012 2:32 pm

omg, did amc find a sucker or what? would you invest in theaters, today? let’s say the best theater in your city – would you buy it or would you buy a macdonald’s? hell no – you’d buy the mickey -d’s, right? yes, people will still go to the theaters, but the trend is not favorable, and eventually it will decline until it will not be profitable to be in business at all. also, with technology like apple tv lurking somewhere around the corner, making theaters even less of an option for audiences. it’s no wonder lopez’s picture is one of teeth, only – he cannot contain his overwhelming joy & happiness for dumping his sinking ship. congrats. lol.

Veteran Assistant • on May 29, 2012 2:32 pm

Sooooooooo disappointed about this happening. So sad. Looks like even more of my business will go to the ArcLight.

AJ • on May 29, 2012 2:32 pm

If patrons misbehave in public places, it’s time to place the blame precisely where belongs: on their mothers and fathers! Children raised in the 1950s wouldn’t dare act that way in public because our parents controlled us; disciplined us and weren’t afraid to whack our butts. Mothers and fathers today are failing to instill good manners in their children.

anon2 • on May 29, 2012 2:32 pm

The U.S. government should block this deal on the grounds that movie piracy and IP theft is rampant in China. Plus, they block most of our Western films from playing in their theatres.

Just wait until they start playing the Chinese national anthem before the previews.

Ben • on May 29, 2012 2:32 pm

So for all the blustering Hollywood did about battling piracy, they OK this deal? Do they realize that any anti-piracy tech that AMC was privy to, now thw Chinese have? Seriously? I guess as long as a few billion are exchanged, then its ok? This deal is idiotic on so many levels its not even funny anymore.